Apple Set to be in the Room Where OpenAI Happens

Apple entering OpenAI's boardroom is all sorts of interesting and wild!
Apple Poised to Get OpenAI Board Observer Role as Part of AI Pact
Apple’s observer position would match that of Microsoft; Phil Schiller, Apple’s former marketing chief, chosen for role

Well this is pretty wild:

Apple Inc. will get an observer role on OpenAI’s board as part of a landmark agreement announced last month, further tightening ties between the once-unlikely partners.

Phil Schiller, the head of Apple’s App Store and its former marketing chief, was chosen for the position, according to people familiar with the situation. As a board observer, he won’t be serving as a full-fledged director, said the people, who asked not to be identified because the matter isn’t public.

Having been both a board member and a board observer at a number of companies over the years, you can't overstate how big of a deal this is. While it's true that observers don't get a formal vote on various governance issues, they're still in the room for every board meeting. Listening. Weighing in. It's obviously meant to be helpful (to both the company and the entity observing) and not nefarious, but it puts Apple in a position to know a lot of what's going on within OpenAI.

Yes, they can and will likely have to recuse themselves for certain topics where there might be competitive overlap, but if OpenAI was overly concerned about this, they wouldn't have given Apple this position.1

Update: And, as it turns out, OpenAI is now no longer giving Apple this position on the board. More below...

And my god, what must Microsoft think of this? I joked that it only cost them $15B or so to get what Apple just got for free. There had already been various reports of tensions between OpenAI and Microsoft around the Apple deal (and perhaps on the flip side, Microsoft's Inflection no-deal deal), but Microsoft must in part see this as letting the fox into the henhouse. The very expensive henhouse built with Microsoft's money!

And Microsoft didn't even have observer rights until after the company nearly imploded and Satya Nadella stepped in to save and restore Sam Altman's job. To be fair, they probably didn't want to be in the board room beforehand simply because of the optics of that role alongside the massive investment (which alone has drawn the gaze of regulators). But once everything went to hell, they clearly felt the need to have more oversight – and understandably so!

But Apple is a totally different story here. Assuming the reporting about their deal with OpenAI is accurate, no money has changed hands between the two sides thus far. I still suspect it might down the road depending on how popular the use of ChatGPT proves to be within Apple Intelligence, but for now it's a technology-for-reach trade. Normally, such deals don't involve access to board rights, so you have to wonder if there's something else behind the scenes here – the potential of a future financing perhaps?2

And it's not just some random person from Apple who is said to be taking this role. It's Phil Schiller. When he's not busy flying planes in WWDC promo videos, he's writing tersely worded notes to the EU and Epic CEO Tim Sweeney. He's one of the longest tenured people at Apple. One of Steve Jobs closest lieutenants, he is now the protector of the brand. In court and everywhere. He's bigger than the SVP of Marketing role that he carried out for ages. He is now the Apple Fellow.3

You can't help but get vibes of then-Google CEO Eric Schmidt on Apple's board. That ended in tension with the rise of Android. Apple is obviously already working on their own AI capabilities. And everyone assumes that they'll own more and more of that stack overtime, potentially pushing onto OpenAI's turf. The same is true of Microsoft, of course. But Microsoft owns 49% of OpenAI. Apple owns 0%.

What strange bed... fellows.

Update July 10, 2024: Reports today suggest Apple will no longer take an observer role on OpenAI's board and -- obviously not coincidenally -- Microsoft will also give up that role as well.

Nothing Boring About OpenAI’s Board
Apple’s role rescinded, Microsoft’s role renounced…

Related Reads from The Inner Ring:
Will OpenAI Bite the Microsoft Hand That Feeds?
A sense of tension between the two sides is inescapable
Did Apple Just End AI’s First Era?
AI’s performance arms race yields to the product arms race…
Ready or Not, Here Apple AI Comes
Will slow but not fully steady win the race?
Can Microsoft Build ‘Apple Intelligence’ in Reverse?
The countdown to ‘Microsoft Intelligence’ feels on. Sorry, OpenAI.

1 You have to wonder if this was at Apple's request, in exchange for the key placement within Apple Intelligence and being slightly wary of where ChatGPT was heading -- or if Sam Altman/OpenAI wanted to make sure Apple was kept close to ensure a good partnership even as Apple expands Apple Intelligence to other AI providers over time. Or, per above, does this point to an expanded Apple/OpenAI partnership over time, and/or a potential investment...

2 As Gurman notes, Apple has taken these types of high profiles board positions before, but with DiDi, that came with a $1B investment from Apple (which didn't stay on the board long).

3 Microsoft's observer is Dee Templeton, also a very long tenured Microsoft executive. But not with the same (high) profile of Schiller.